Oct 22 (Reuters) - Defense contractor Lockheed Martin ( LMT )

lifted its annual profit and sales forecasts on Tuesday,

but shares slid 5% because the company's F-35 fighter jet

program faced payment headwinds stemming from the government

contracting process.

The Bethesda, Maryland-based company now expects per-share

profit of $26.65 for 2024, above its earlier forecast of $26.10

to $26.60.

Still, shares slid 5.2% in early trading in New York to

$582.71.

Lockheed's

flagship F-35 program

has been facing challenges, particularly due to delays in

rolling out an upgrade intended to enhance the fighter jet's

processing capabilities

.

But drawn-out contract negotiations have meant Lockheed

is having to incur procurement costs for the F-35 jets in lots

18 and 19, set to be delivered in 2026 and 2027.

The absence of a contract means Lockheed is having to

pay suppliers for long-lead materials such as sensors, radars

and other electronics for the jets without being reimbursed by

the government. This impacted sales and profit at both the

business and company level.

"Had the program been fully funded over this period of

time in the third quarter, we would have had sales closer to

about 5% growth." Jay Malave, Lockheed's CFO, told Reuters in an

interview.

He added that in the quarter, the company's "profit was

up 3% and that would have similarly - with the F-35 impact on

that lot 18-19 negotiation - would have otherwise been up 7%."

Malave told Reuters the company's boosted annual guidance year

anticipated a finalized contract by December 31.

An initial "handshake" deal on a contract is expected

next month, a person familiar with the negotiations said on

condition of anonymity.

The business that makes the F-35 jet posted a 3% decline

in sales in the third quarter. Lockheed's overall revenue of

$17.10 billion missed analysts' estimates of $17.35 billion,

according to LSEG data.

Lockheed also sees full-year sales of $71.25 billion,

slightly above the midpoint of its earlier forecast of $70.50

billion to $71.50 billion.

Conflicts in the Middle East and the protracted

Russia-Ukraine war have resulted in nations boosting defense

spending, which has benefited arms manufacturers.

Lockheed's per-share profit stood at $6.80, beating

expectations of $6.50.